What is Subsidy: Know its Meaning, Types, Categories and Schemes

Subsidy is a discount offered by the Government of India to provide necessary products to people at affordable prices across the nation. Subsidy is also identified as the transfer of a certain amount of money from the Government to an entity that further sells subsidized products to people. Subsidy is a part of non-plan expenditure of the Government, in which the subsidy cost is much lower than the actual cost of production.

Providing subsidies is an inevitable task across all the Governments of nations, worldwide. Most important types of subsidies in India are food, interest, petroleum, and fertilizer subsidies. Let’s further discuss various types, categories, schemes, and benefits of subsidy.

Types of Business Loan Subsidies in India

• Cash/Credit Subsidies
• Consumption Subsidies
• Education Subsidies
• Employment Subsidies
• Export/Import Subsidies
• Housing Subsidies
• Oil, Food & Fuel Subsidies
• Procurement Subsidies
• Production Subsidies
• Regulatory Subsidies
• Tax Subsidies
• Transport Subsidies and many more

Subsidy Category

Economic Subsidy	Social Subsidy
Agriculture	Education
Industry	Healthcare
Irrigation & Flood Control	Water Supply
Power & Energy	Sanitation
Transport	Rural Housing
Communication & Others	Women empowerment and others

Most of the companies are offered subsidized products by the Government to further supply it to needy people or families below the poverty line at a reduced cost. Largest subsidy in the world is Mahatma Gandhi Employment Guarantee Act (MNREGA) employment. Under this act, the Government of India offers approximately Rs. 45,000 crores to every non-formally employed citizen which is around Rs. 4,000 per person.

Benefits of Subsidy

• Subsidy is a direct or indirect payment to people/farmers by the Government in form of cash payment or tax reduction
• Daily household or necessary items related to food, education, agriculture, and fuel comes at affordable rates
• Subsidies can be utilized to balance market failures to achieve economic productivity
• Subsidized education helps in further contribute to the nation’s GDP, as increased education leads to higher employment
• Subsidy is also offered in form of tax exemptions
• Helps struggling markets by lowering the burdens and further providing financial support for future ventures
• Subsidies have also helped in empower women and poor people of the country by offering subsidies on healthcare, midday meal program, and Mahatma Gandhi Employment Guarantee Act (MNREGA)

Stand-Up India Subsidy Schemes at Central Level

Subsidies for All
Subsidy Scheme	Ministry under the Government of India
Credit Linked Capital Subsidy Scheme for Technology Upgradation (CLCSS)	Ministry of MSME
Extension for Financial Assistance for Coir Units in the Brown Fiber Sector	Ministry of MSME
Government Subsidy for Small Business for Cold Chain	Ministry of Food Processing Industries
Integrated Development of Leather Sector (IDLS)	Ministry of Industries and Commerce
ISO 9000/ISO 14001 Certification Reimbursement Scheme	Ministry of MSME
Marketing Assistance Scheme by NSIC	Ministry of MSME
Marketing Support /  Assistance to MSMEs	Ministry of MSME
Prime Minister Employment Generation Program (PMEGP)	Ministry of MSME
Scheme for Technology Upgradation / Establishment / Modernization for Food Processing Industries	Ministry of Food Processing
Support for Entrepreneurial and Managerial Development of MSMEs	Ministry of MSME
Technology and Quality Upgradation Support for MSMEs (TEQUP)	Ministry of MSME
Technology Upgradation Fund Scheme (TUFS)	Ministry of Textiles

Note: All the above-mentioned subsidy schemes under Stand-up India are applicable all over India.

Also Read: What is Stand Up India Scheme

More about Credit Linked Capital Subsidy Scheme (CLCSS)

Credit Linked Capital Subsidy Scheme (CLCSS) is a Government initiated scheme under The Ministry of Micro, Small, and Medium Enterprises (M/o MSME) for technology advancement of Small Scale Industries (SSIs) in both rural and urban areas. Under this scheme 15% capital subsidy is offered to SSIs on loans up to Rs. 1 crore for the modernization of plant and machinery. Subsidies are also offered to MSMEs availing loans for technology upgradation. The calculation of the capital subsidy amount is based on the cost of acquired plant and machinery by the businesses.

Direct Benefit Transfer Scheme

Sometimes subsidies fail to solve the purpose they are introduced, as several times well-to-do sections of the society avail its benefits rather than people belonging to the poor sections of the society. Witnessing this disparity, the Government launched a direct benefit transfer scheme for the poor which was later linked with the Aadhar card of every individual or family falling below the poverty line.

Agricultural Subsidies provided to farmers in India

• Input Subsidies: Fertilizer, Irrigation, Power, Seed and Credit Subsidies
• Price Subsidy
• Infrastructural Subsidy
• Export Subsidy

As per various economists, a subsidy is a failure if it fails to improve the overall economy of a country. For policymakers or Government initiated scheme members, the subsidy might be considered a success, if it helps in achieving any set target. Most of the subsidies do achieve economic or cultural targets, still are unable to match the expectations of the needy people. However, subsidy helps in raising the profits of people receiving benefits from subsidies offered by the Government and availed by the people of India.